Speaker 1: You're listening to AC N A podcast.
Speaker 1: Hello, I'm Andrea Heng. Welcome back to the Money Talks podcast.
Speaker 1: I hope you've been enjoying the topics we've put out
Speaker 1: on this podcast so far. If you haven't listened, we
Speaker 1: highly recommend a limited series called This or that where
Speaker 1: we got our guests to pick one financial option over
Speaker 1: another from housing to cars to lifestyle packages. We also
Speaker 1: took a look at
Speaker 1: alternative investments that people are really getting into, namely find
Speaker 1: watches and find wine. Today, we want to talk about
Speaker 1: credit cards. Now, if you are not careful, they can
Speaker 1: be a double edged sword and the debt can build up,
Speaker 1: but they also provide convenience and a fuss free way
Speaker 1: to even save money
Speaker 1: quite the conundrum, right? So I know a lot of
Speaker 1: people who have applied for the best credit cards out
Speaker 1: there in the market want to rack up miles another
Speaker 1: one for cash back redemptions. Even a third card for
Speaker 1: extra perks like being a woman and being in a
Speaker 1: certain salary bracket, maybe even 1/4 because its sexy color
Speaker 1: represents exclusivity. But what I'm really wondering is, is this
Speaker 1: all even necessary
Speaker 1: to answer these questions I have with me a lie.
Speaker 1: He is General Manager for Singapore at Money Smart Group.
Speaker 1: Welcome to Money Talks. Thanks
Speaker 2: Andrea. Ok, thanks for having me
Speaker 1: first. I must ask you how many credit cards do
Speaker 1: you own
Speaker 2: personally? Just one? Wow, just
Speaker 1: one. Ok. What kind of credit card is this one
Speaker 1: credit card? I
Speaker 2: particularly like the cash back category. So
Speaker 2: credit card. Ok.
Speaker 1: So you think that that's like the best for your lifestyle,
Speaker 1: your preferred spending habit, correct? What is your spending habit
Speaker 1: on that card? And how do you then divide your
Speaker 1: spending between cash and
Speaker 2: credit? I have quite consistent spend every month and typically
Speaker 2: it's around like necessities. Secondly, I'm a hassle free person
Speaker 2: not to
Speaker 1: be that kind of
Speaker 2: person
Speaker 2: and being hassle free. I just prefer my rewards to
Speaker 2: be a cash back, which is a cash rebate and
Speaker 2: I don't have to be worried that I don't redeem
Speaker 2: the cash rebate because it's automatically offset. Whereas certain categories
Speaker 2: like air miles or reward points, you have to remember
Speaker 2: to redeem it. Imagine doing all that work and forgetting
Speaker 2: to redeem
Speaker 1: it. Yeah, it sounds like a very simple task and
Speaker 1: that's how they sell it to you as well,
Speaker 1: but it actually is a lot of work and you
Speaker 1: miss the deadline. That's it. Exactly. You lose all your
Speaker 1: accumulated points in miles.
Speaker 2: I know personally of people who would build their own
Speaker 2: kind of like spreadsheets to calculate how many rewards from, like,
Speaker 2: 4 to 5 different credit cards.
Speaker 2: But that's not me.
Speaker 1: I don't, yeah, I don't have time to update my
Speaker 1: personal spreadsheet, let alone for four credit
Speaker 2: cards. Exactly. But I think to be fair from the
Speaker 2: stories and experiences of my friends in the initial years
Speaker 2: is to get into the habit, you may miss one
Speaker 2: or two rewards and everything. But
Speaker 2: what I heard from my friend's personal account is they
Speaker 2: took like maybe a year and year and a half
Speaker 2: to build up their habit. But once it becomes a
Speaker 2: bit of a muscle memory, I heard that on a
Speaker 2: weekly basis it doesn't take too much time.
Speaker 1: They must have a different brain function that I don't
Speaker 1: have so different cards have different rewards and there are
Speaker 1: just so many to choose from it. Boggles my mind.
Speaker 1: Am I really losing out if I don't own a
Speaker 1: credit card with some kind of reward pack to it?
Speaker 2: If you're going to spend on something anyway, you should
Speaker 2: definitely have at least one credit card. Lah. Because you're
Speaker 2: going to spend, you might as well maximize your spending right?
Speaker 2: And spend more effectively
Speaker 1: reward yourself with that spending.
Speaker 2: Yeah, if you're going to spend on like necessities, you
Speaker 2: might as well have one credit card. But if, let's
Speaker 2: say on the other spectrum, if you're only going to
Speaker 2: spend the X amount and because you're looking at all
Speaker 2: the different credit card points and you end up having
Speaker 2: like four or five credit cards and you end up
Speaker 2: racking up like maybe two or three what you actually
Speaker 2: wanted to spend
Speaker 2: then as you said, you know, it's a double edged sword,
Speaker 2: not so good.
Speaker 1: Ok, so say I'm shopping around for a credit card,
Speaker 1: so many out there, right? And to help me choose one,
Speaker 1: a big reference point tends to be without a doubt
Speaker 1: the benefits, the perks, the rewards, right? So in your experience,
Speaker 1: how do people choose a card? So for instance, I
Speaker 1: have one that has say my mortgage loan on it
Speaker 1: with the bank or I open a fixed deposit account
Speaker 1: with them.
Speaker 1: Should I do more work and find out about the
Speaker 1: benefits and perks and making sure that everything sort of
Speaker 1: harmonizes in my sort of credit card ecosystem.
Speaker 2: I think that's the ideal case, but in reality, like
Speaker 2: we said, it takes a lot of work to get there.
Speaker 2: I think we can follow a very simple like just
Speaker 2: three steps first, evaluating spending habits and amount. Secondly, ask
Speaker 2: ourselves a very honest question, right? Everyone likes to be rewarded,
Speaker 2: ascertain what kind of rewards that you like?
Speaker 2: I think a lot of Singaporeans, they love to travel.
Speaker 2: It's nothing wrong to, to rack up air miles and
Speaker 2: to fly for free. Some people even have like goals
Speaker 2: to fly business class to a certain destination. Yeah, I
Speaker 1: know someone who has actually written a guide book on
Speaker 1: how to chase air miles on credit
Speaker 2: cards. I probably know that person too. But and once
Speaker 2: you ascertain these two things, then you go into comparing
Speaker 2: what kind of card. So for example, if it's cash
Speaker 2: back air miles or say rewards within that category go
Speaker 2: and compare and
Speaker 2: I think simply put to compare, just take note of
Speaker 2: three things. One is the reward terms and conditions. So
Speaker 2: this first bucket is where we have to open our
Speaker 2: eyes a little bit more to look at the best
Speaker 2: kind of reward currency. For example, if you are in
Speaker 2: for cash back, right? I'm looking at $1 spend equals
Speaker 2: to how many percent cash back, right? That reward currency. Secondly,
Speaker 2: there are maximum caps and minimum spending. So for example,
Speaker 2: if I only
Speaker 2: spend $500 right? But the minimum spend is $1000 right?
Speaker 2: Then I don't, yeah, I lose out thirdly it's expiry
Speaker 2: of points, right? Some have no expiry date, others have.
Speaker 2: Um So in that ecosystem, I think when you're comparing
Speaker 2: rewards terms and conditions, those are the few things they
Speaker 2: have to look at. Second thing is around fees. So
Speaker 2: there's very popular question people always ask, do I have
Speaker 2: to pay annual fees for my credit card? And when
Speaker 2: you compare
Speaker 2: are cards that allow you for free waiver first two years,
Speaker 2: if you are a kind of hassle free kind like myself.
Speaker 2: I will go for these kind of cards, whereas there
Speaker 2: are other cards that are annual fee compulsory, but nobody
Speaker 2: really knows whether you can call the bank and get
Speaker 2: them waived or not. A lot of them try.
Speaker 1: I spoke with someone recently about using a credit card
Speaker 1: for groceries for everyday spending. And this person told me
Speaker 1: not to do that. It's a very slippery slope once
Speaker 1: you do that.
Speaker 1: But you're also coming from the camp of having the
Speaker 1: cash back card. What do you say about that comment?
Speaker 1: Is there
Speaker 2: any reason why is it?
Speaker 1: I think it was more to do with when you
Speaker 1: use a credit card for everyday spending and you get
Speaker 1: the cash back on that the reward versus the
Speaker 1: actual spend didn't add up or something
Speaker 2: like that. Ok. So I use my cash back credit
Speaker 2: card for everyday spend. And I think what your friend
Speaker 2: is saying is true, right? But that's on one spectrum
Speaker 2: that you want to optimize to get the best kind
Speaker 2: of cash back and the best kind of rewards in
Speaker 2: that sense, maybe a cash back card is not so good.
Speaker 2: Maybe a rewards points, credit card
Speaker 2: which gives you actually more points that you have flexibility
Speaker 2: to choose what kind of like products or vouchers to
Speaker 2: redeem that might be better. So when I got into
Speaker 2: a cash back credit card for everyday spend, I'm actually
Speaker 2: not in the market for like the best currency. It's
Speaker 2: more for the ease, right? As long as my cash
Speaker 2: back is average, it's not the lousiest, it's not the
Speaker 2: best that's suitable
Speaker 1: for me. Ok, so you are. No man in the.
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Speaker 1: Ok. So let's go back a little bit to what
Speaker 1: you were talking about that annual fee. You talked about
Speaker 1: how some credit card companies offer, like a one year
Speaker 1: or two year annual fee waiver. And then there are
Speaker 1: some that don't. And then we try our luck as
Speaker 1: customers are the annual fees even worth paying for in
Speaker 1: the
Speaker 2: first place. It depends. But I would say as a
Speaker 2: blanket rule, the fee paying cards have better benefits than
Speaker 2: the non fee pay. Oh, interesting. Right. The annual fee
Speaker 2: is predominantly there.
Speaker 2: The maintenance of the credit card benefits and some of
Speaker 2: the operations around it also, it adds on to the
Speaker 2: prestige of the credit card that's on one side. But
Speaker 2: on the other side is if you have a fee
Speaker 2: bank card and you don't utilize those benefits, it is
Speaker 2: also wasted.
Speaker 1: Of course, then you're paying upwards of 90 to 100
Speaker 1: and $20 per year for something that's just going to
Speaker 1: collect dust in your wallet. And
Speaker 2: when you use it for a fancy meal meal, one
Speaker 2: time purchase,
Speaker 1: how many is too many when it comes to credit cards?
Speaker 1: Because
Speaker 1: I know of people who actually get a kick out
Speaker 1: of maximizing the rewards of each credit card they own.
Speaker 1: I know someone who has four. I know someone who
Speaker 1: has six and then there's people like you and me,
Speaker 1: we only have one. Where do you stand on
Speaker 2: this? I think based on the data point that I
Speaker 2: saw done by you gov in 2019, that research actually
Speaker 2: says that more than three quarters of Singaporeans
Speaker 2: have at least one credit card and slightly more than
Speaker 2: half 50% of Singaporeans have two credit cards. Only about 10%
Speaker 2: have six cards or more. So that kind of frames
Speaker 2: your question. The deal hunters or what I call the power.
Speaker 2: Users of credit cards are probably like 10 15%. It
Speaker 2: really depends on your preference. Right? There's always an opportunity
Speaker 2: cost between
Speaker 2: maximizing the benefits and the time invested. I always like
Speaker 2: to add one more aspect to consideration. Is,
Speaker 2: is the credit card helping you spend effectively or is
Speaker 2: it egging you to spend more? If it's egging you
Speaker 2: to spend more, it could lead to unhealthy spending habits.
Speaker 1: So your team want credit card, as I said earlier,
Speaker 1: would you go for a second credit card? Do you
Speaker 1: think in the
Speaker 2: future? I think it's a good question. The answer is
Speaker 2: likely to be yes reason because travel has reopened up. Right.
Speaker 2: And being a cash back reward person, I'm only earning
Speaker 2: cash back from my spend. Right. But if I'm planning,
Speaker 2: let's say a big trip a couple of years later
Speaker 2: and air miles credit card would be good. And I
Speaker 2: know for a fact that most families have two or
Speaker 2: three cards spread
Speaker 1: across. Yeah, I was gonna ask about that as well. Yeah,
Speaker 1: the families operate differently. So then they will have different
Speaker 1: credit card for different types of expenses. It's very
Speaker 2: fair to have one cash back card and maybe an
Speaker 2: air miles or rewards card to actually rack up both
Speaker 2: sides of the rewards.
Speaker 1: Ok. Buy us aside if I were to have one
Speaker 1: credit card to rule them all,
Speaker 1: I kind of think I know the answer to this one.
Speaker 1: Which kind should I go for in terms of the
Speaker 1: overall reward, let's say I'm someone who shops quite a
Speaker 1: fair bit. I like my fashion, but I also need
Speaker 1: it for certain household expenditures. What would be the best
Speaker 1: overall card for someone whose spending habits are similar to mine?
Speaker 1: I
Speaker 2: would think if there's only one card to rule them all,
Speaker 2: probably a reward points card would be good
Speaker 2: because the whole value proposition of a rewards points card
Speaker 2: is it's flexible that reward points that you accumulate with
Speaker 2: the bank's reward catalog allows you to get rebates or
Speaker 2: vouchers or redeem products even transfer those points into air
Speaker 2: miles if you want to travel. But just one thing
Speaker 2: to take note how appealing the reward points is really
Speaker 2: depending on how appealing the catalog is.
Speaker 1: Of course, because if it's going to give me
Speaker 1: brands or products that I don't typically use and what's
Speaker 1: the point, right? Ok. So one thing that we've seen
Speaker 1: an increase of is the number of alternative payment methods. Obviously,
Speaker 1: I'm talking about buy now pay later schemes, right? These
Speaker 1: are apps that allow you to break up large amounts
Speaker 1: into smaller payments, more manageable payments usually in installments of
Speaker 1: three months, right?
Speaker 1: Are there any risks associated with these methods that could
Speaker 1: actually put good old credit cards out of business?
Speaker 2: I don't think buy now pay later would put the
Speaker 2: traditional credit card players out of business simply because credit
Speaker 2: cards also allow one to take an installment payment plan
Speaker 2: for big purchases for much longer too. Exactly, for much
Speaker 2: longer for buy. Now pay later, it's a different kind
Speaker 2: of mechanism other than using credit cards. And not everyone
Speaker 2: would get into the behavior of downloading something new to
Speaker 2: split the payment into two or three. Even though I
Speaker 2: think nowadays is very popular, there are a lot of incentives.
Speaker 2: My fear is that
Speaker 2: a lot of the people that they can buy now
Speaker 2: pay later are maybe not the ones that have a
Speaker 2: very high purchasing power. Right. So that facility actually is
Speaker 2: more beneficial or speaks to people in that category slightly
Speaker 2: better than credit cards, right? Whereas credit cards have a
Speaker 2: more holistic benefit rewards are not just one of the benefits,
Speaker 2: you know, miles card come with premier kind of travel loungers,
Speaker 2: all these like auxiliary benefits which appeal to a lot
Speaker 2: of people
Speaker 1: French benefits. Of course, they count as well. Exactly is
Speaker 1: not owning a credit card at all an option.
Speaker 2: That's a good question. I've got some of these questions before.
Speaker 2: I think it's practical to at least have one credit card.
Speaker 2: And these are some of my reasons. Right. Firstly, we
Speaker 2: go back to spending effectively. If you're going to spend,
Speaker 2: you might as well get some rewards. Secondly, having a
Speaker 2: credit card actually builds up your credit score. Right? Yes. Right.
Speaker 2: Especially for new to credit card users. And thirdly it
Speaker 2: helps you
Speaker 2: is your cash flow or it gives you a higher
Speaker 2: purchasing power. Say for example, you bought a new place
Speaker 2: and you need to buy a furniture and lastly it's
Speaker 2: convenient and it's accessible. I mean, you can't do any
Speaker 2: e-commerce shopping without a credit card much nowadays. Right. So
Speaker 2: I think all these advantages warrant at least one in
Speaker 2: my opinion. My final
Speaker 1: question to you before I let you go. Is there
Speaker 1: such a thing as a bad credit card to get?
Speaker 2: Probably first time somebody has asked me that bad credit card.
Speaker 2: I don't think there is a bad credit card per se,
Speaker 2: but I think what is not a good use of
Speaker 2: credit card is just to get it for the sign
Speaker 2: up bonus. And let's say if you forget to make
Speaker 2: certain payments and you end up incurring fees that you
Speaker 2: can't waive off and you're just having that like thick
Speaker 2: many plastics in the wallet, right? Which actually rack up
Speaker 2: fees that you don't know of. I think that would
Speaker 2: be a bad behavior. Not so much of a bad
Speaker 2: credit
Speaker 1: card. Right?
Speaker 1: Didn't mom and dad warn you about the dangers of
Speaker 1: credit cards? Mine certainly did. But if you're a rewards
Speaker 1: king or queen and you're able to keep those credit
Speaker 1: card bills in tip top shape, then go ahead and
Speaker 1: burn that plastic. But if it's just too much of
Speaker 1: a hassle know that there are singular options for you,
Speaker 1: including not owning one at all. Thanks very much
Speaker 1: for laying out all the cards on the table and
Speaker 1: seeing which ones I was playing or in this case. Hey,
Speaker 1: and thanks to you, our listener. If you've enjoyed this
Speaker 1: episode of Money Talks, there's more content for you to enjoy.
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Speaker 1: Money Talks is Jacqueline Chan, Joanne Chan, Christina Robert and
Speaker 1: I'm Andrea Ha.